How Much Wealth Do I Need?

COVID has caused Americans to rethink what it takes to be considered ‘wealthy.’ Charles Schwab and Company recently completed its annual Modern Wealth Survey of 1,000 Americans.  Their findings concluded that one needs $1.9 million in personal net worth to be considered wealthy.  That number is down from the pre-COVID definition of wealthy at $2.6 million.

Two other categories showed similar results:

  • Financial Happiness – according to survey responses, the target amount of money needed for financial Happiness is $1.1 million versus $1.75 million pre-COVID.
  • Financially Comfortable – again, expectations have dropped where survey respondents said, on average, they needed $624,000 to be financially comfortable versus $934,000 in the pre-COVID survey.

What factors are driving these lower expectations?  I suspect a dose of reality delivered to families as the country shut down in the early stages of the COVID-19 epidemic and the slow recovery that we are still experiencing today.  Over 50% of survey participants indicated their finances had been negatively impacted by the pandemic, many experiencing either income reductions or layoffs.  We have not experienced anything like this in our lifetime, and virtually everyone has had their lives disrupted somehow.  This will cause you to rethink many aspects of your life, including health, finances, and social norms.  People have realized they can live on less, and many have refocused on what is most important to them, whether it be mental health, physical health, or the importance of relationships.

One benefit of surviving the pandemic is that people are much more aware of the importance of having a financial plan, including emergency reserves.

How should you think about your wealth needs?

Surveys are great for starting a conversation, but how should you think about your own wealth needs?  We know that every case, every family situation, is different.  A good starting point is to multiply your annual income by twenty.  So if you make $50,000 per year and multiply that by twenty, you get $1,000,000. Here’s what this means:  If you lost your $50,000 per year job (or retired) and had $1,000,000 in investments (a combination of retirement plan and personal investments), withdrawing $50,000 per year would represent a 5% withdrawal rate.  Properly invested, that should last a lifetime, including income increases to help address inflation.   So, in this case, $1,000,000 is your number…your target for wealth accumulation (excluding your home).  That number can be reduced by any permanent sources of income such as Social Security.  For example, if your Social Security is $10,000 per year, you would multiply $40,000 times twenty equals $800,000…your adjusted wealth target.

This exercise is just the starting point of one of life’s most essential and complex conversations – how much wealth do I need?  Some people are fully equipped to answer this question on their own, but many will need the help of an experienced financial advisor.  To find a Certified Financial Planner near you, visit

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professional photo of certified financial planner Stewart Welch wearing black suit and red tie

Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States.  He is the author or co-author of six books, including 50 Rules of Success J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaireand 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch GroupConsult your financial advisor before acting on comments in this article.



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